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Lending Club Discussion => Investors - LC => Topic started by: TonySaunders on July 15, 2013, 01:29:59 PM

Title: Competing with institutional lenders for notes.
Post by: TonySaunders on July 15, 2013, 01:29:59 PM
I'm almost always online while new loans are being posted. Lately, the amount of time it takes for a "good" loan to be fully funded is on the order of 30 seconds.

I don't know that institutional lenders are hogging the good notes by using automated methods to buy them up as quickly as possible... but I totally know. It's driving me crazy. I need more than 3 seconds per loan to decide if I want in, and I'm tired of having to settle for the left-overs. The 70% rule for institutional lenders has been completely useless in practice.

This race-for-the-notes is completely unacceptable. I know there isn't enough for everyone to have everything they want, but I want my share. I shouldn't have to frantically glance-click-buy my notes.
Title: Re: Competing with institutional lenders for notes.
Post by: Zach on July 15, 2013, 01:43:35 PM
I'm almost always online while new loans are being posted. Lately, the amount of time it takes for a "good" loan to be fully funded is on the order of 30 seconds.

I don't know that institutional lenders are hogging the good notes by using automated methods to buy them up as quickly as possible... but I totally know. It's driving me crazy. I need more than 3 seconds per loan to decide if I want in, and I'm tired of having to settle for the left-overs. The 70% rule for institutional lenders has been completely useless in practice.

This race-for-the-notes is completely unacceptable. I know there isn't enough for everyone to have everything they want, but I want my share. I shouldn't have to frantically glance-click-buy my notes.

Hate to say it, but there really isn't much room anymore for hand-picked notes - and there probably never will be again. You should seriously consider switching to a service like Interest Radar and fine-tuning all the filtering strategies to your liking. You may be surprised, you really can do some serious filtering work within IR and use auto-invest.

Have you considered using an automated solution in the past?

Just my two cents...
Title: Re: Competing with institutional lenders for notes.
Post by: LonghornSF on July 15, 2013, 05:37:55 PM

This race-for-the-notes is completely unacceptable. I know there isn't enough for everyone to have everything they want, but I want my share. I shouldn't have to frantically glance-click-buy my notes.

This will sound callous but LC really doesn't care if you "find it unacceptable" that loans are being funded quickly. For LC, that's a great thing and it only boosts their bottom line while making borrowers happy.

LC is just now getting tons of institutional money thrown at them. As word continues to spread about the returns available on LC, they will only get more money their way. In my opinion, within 3-5 years it will be very difficult to earn a >10% IRR after credit costs on LC. We're in (or were in) a golden age for LC investors which will rapidly close. I'm enjoying it while it lasts.  8)
Title: Re: Competing with institutional lenders for notes.
Post by: investforfreedom on July 15, 2013, 09:39:18 PM
I talked about the practice of front-running that is increasingly brazen in this thread on Prosper:
http://www.lendacademy.com/forum/index.php?topic=1271.0

This is true for LC as well.  I added $25 to a loan that just came out on the LC platform today.  But when I clicked "Continue" about 10 seconds later, it just vanished.  I am reposting that particular post:

Peter,

Thanks for your response.  I certainly understand that there is a place for APIs, since not all investors have the time to scan the loans on their own, or even if they have, they might not want to do it. 

The issue I am bringing up--which I raised before--has to do with front-running, especially using API to front-run everybody else by the large investors.  I know that third-party developers are scrambling to develop ever faster and more efficient APIs.  You might be able to successfully use NSR for now to get some good D and E loans, but who knows if somebody else might come up with a better "mousetrap" in the future, say, beating NSR by 1 second or fraction of a second?  You would be just like those of us now holding the bag.  Chances are those with deep pockets are in the best position to develop the best APIs.  99% of small investors would have no access to them or simply can't afford to subscribe to them.  This is likened to high-frequency trading in the stock market, where these institutions try to exploit inefficiencies in the prices for microseconds. (I used to do some stock trading.)  And only the big banks or those with lots of money and resources can come out on the top with this kind of trading practice.

Again, don't take me wrong.  I am not opposed to people using APIs.  I am just saying that when they are used by the big investors, it's going to shut out retail investors very quickly.  What I propose with the time lock of 10-15 minutes is that it would at least give small investors a chance to get the better loans.  But if two or three big boys scoop up the best loans within seconds, then even most small investors using APIs can't get in.  After all, the big investors already have their "whole loans" to play with.

Peter, I would really appreciate it if you could bring this issue to the attention of Prosper and LC.  It might not affect those of you using APIs just for now, but this issue is expected to loom large in the future as p2p continues its rapid growth.  It is not just a question of fairness.  The underlying idea of p2p is lending by common folks to other common folks, but if it ends up being dominated by big investors and institutions, then it ceases to be p2p.


My last successful Automated Quick Invest for a D or E loan happened on July 1st and they are really happening at a rate of about one per week.

Here is the deal: there are in fact plenty of good D and E loans available on Prosper but as is pointed out above they are snapped up in the first 30-60 seconds. These are almost all investors using the Prosper API which has been widely available to all investors for some time now. I am using the API (via Nickel Steamroller's NSR Premium product) and I am finding good D/E loans pretty much every day.
Title: Re: Competing with institutional lenders for notes.
Post by: storm on July 16, 2013, 04:18:03 AM
I'm cheap, so I'm waiting ever so patiently for LC to come out with its own auto-invest tool.  I can usually find a couple or more loans that meet my criteria each day, and then I usually invest $50 each as I don't need to diversify my account much more.

I do think LC really needs to think twice how they are treating small individual investors.  If it wasn't for us risking a few hard-earned dollars from our bank account and trying things out for the past 6 years, LC would not be where it is today. 

From an IT perspective, it is less cumbersome to have just a few investors contribute to each loan.  On the other hand, this feeding frenzy they've created 4 times a day is not so good on their servers especially as demand increases and third-party robots keep looking for loans.  I think we are seeing the effects of that with slower payment processing and loan status updates.  My recommendation is to restrict the amount that can be invested per user to, say, $100 for the first 24 hours a loan is posted, and then the institutional investors can swoop in after that.
Title: Re: Competing with institutional lenders for notes.
Post by: New Jersey Guy on July 16, 2013, 07:37:05 AM
"My recommendation is to restrict the amount that can be invested per user to, say, $100 for the first 24 hours a loan is posted, and then the institutional investors can swoop in after that."

I can't buy off the LC Platform, but that suggestion appears to be fair for everybody.  Like Longhorn said, it would still enable LC to "Boost their bottom line while making <all> investors happy."

But what would happen if small investors bought out all the good loans within the first 24 hours, and there was nothing left for the institutional investors?  Is that possible?

Title: Re: Competing with institutional lenders for notes.
Post by: rev on July 16, 2013, 03:47:00 PM
LC and Prosper are stepping away from p2p and becoming b2c. Eventually someone will realize that and start the "first p2p lending site since LC and Prosper left". At least the hard part, proving the concept and establishing regulatory requirements, is behind. That means lower ramp up costs and less risk, which translates into lower fees, which in turn will attract more borrowers. LC and Prosper will be more like the banks, while the new site will be more like LC and Prosper were in the past.
Then the whole cycle starts over, unless they're smart enough to stick with a plan this time and implement caps or whatever else is needed to stand ground and remain p2p.
Title: Re: Competing with institutional lenders for notes.
Post by: IrishMoss on July 16, 2013, 04:08:02 PM
I haven't even started yet, and I'm already feeling like I missed the boat...  :'(
Title: Re: Competing with institutional lenders for notes.
Post by: investforfreedom on July 16, 2013, 08:41:28 PM
It is quite clear that you can't get p2p off the ground without institutional backing.  The question has to do with how much these platforms would allow big investors and financial institutions to dominate.  As you said, LC and Prosper are going the way of b2c.  I'm not even sure if any new site that tries to operate as LC and Prosper did in the past would be sustainable.  I'd hazard a guess: If as a retail investor you don't like the way LC is operating now, you'd hate it even more when it goes into IPO next year.

LC and Prosper are stepping away from p2p and becoming b2c. Eventually someone will realize that and start the "first p2p lending site since LC and Prosper left". At least the hard part, proving the concept and establishing regulatory requirements, is behind. That means lower ramp up costs and less risk, which translates into lower fees, which in turn will attract more borrowers. LC and Prosper will be more like the banks, while the new site will be more like LC and Prosper were in the past.
Then the whole cycle starts over, unless they're smart enough to stick with a plan this time and implement caps or whatever else is needed to stand ground and remain p2p.
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 16, 2013, 09:26:14 PM
If you like the returns from selecting the "Cream of the crop", then pony up and pay for a service that lets you compete.  There are plenty of loans that don't get sucked up immediately with awful returns of what, 7%?

I understand it sucks, but really I don't understand why people think making money should be painless or complain about it.  If you have to log on at a certain time each day to get a 12% return, that surely is a #firstworldproblem.   And probably a #uppermiddleclassproblem as well.   Warren Buffet spends his entire day trying to get those kinds of returns and all I have to do is set an alarm clock?  Man. . . I'm the luckiest 24 year old in the world.

I don't mean to sound like a contrarian, but I really don't get why people complain so much about it.  I'd prefer the platform survive and I know my account alone isn't going to pay LC's bills.

It is what it is.  Learn to compete or just complain yourself into a S&P Index fund lol

Title: Re: Competing with institutional lenders for notes.
Post by: AnilG on July 16, 2013, 09:33:14 PM
I don't mean to sound like a contrarian, but I really don't get why people complain so much about it.  I'd prefer the platform survive and I know my account alone isn't going to pay LC's bills.

+1
Title: Re: Competing with institutional lenders for notes.
Post by: investforfreedom on July 16, 2013, 09:58:16 PM
LC has more than enough institutional backing to survive going forward.  Is it necessary to keep kissing up to these big guys?  Prosper will soon too.

Pony up and pay for a service?  Did you carefully read my reposted message?  You might be able to compete for now by signing up for NSR, but the big boys are the ones who will develop the fastest and the most efficient APIs, which you and I have no access to or can't afford.  All they need to do is to beat NSR by 1 second or fraction of a second to soak up the best of loans, especially when they are allowed to take 50 or 75% of the loans.  If you are talking about frontrunning, big boys will always win.  Ask Goldman Sachs if you are not sure.

If you like the returns from selecting the "Cream of the crop", then pony up and pay for a service that lets you compete.  There are plenty of loans that don't get sucked up immediately with awful returns of what, 7%?

I understand it sucks, but really I don't understand why people think making money should be painless or complain about it.  If you have to log on at a certain time each day to get a 12% return, that surely is a #firstworldproblem.   And probably a #uppermiddleclassproblem as well.   Warren Buffet spends his entire day trying to get those kinds of returns and all I have to do is set an alarm clock?  Man. . . I'm the luckiest 24 year old in the world.

I don't mean to sound like a contrarian, but I really don't get why people complain so much about it.  I'd prefer the platform survive and I know my account alone isn't going to pay LC's bills.

It is what it is.  Learn to compete or just complain yourself into a S&P Index fund lol
Title: Re: Competing with institutional lenders for notes.
Post by: Fred on July 16, 2013, 11:53:58 PM
I'd prefer the platform survive ....

In a twisted way, this is where institutional investors can be beneficial to retail investors: to help ensure LC survive.
Title: Re: Competing with institutional lenders for notes.
Post by: Fred on July 17, 2013, 12:23:21 AM
If you are talking about frontrunning, big boys will always win ....

You used the term "front-running" twice; however, it seems to be used in the context of trading speed.

On the other hand, if it means to "trade ahead of your client" (http://en.wikipedia.org/wiki/Front_running), I think the big boys will think twice before attempting to win in this contest.   They might get a call from SEC or CFTC.

If we are talking about speed of execution, one of the best ways to compete is to have your server co-locate in the same area as the LC servers (I believe they are in Nevada).  Having said that, I think the high-speed trading landscape for P2P is still wide open.
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 17, 2013, 06:38:28 AM
LC has more than enough institutional backing to survive going forward.  Is it necessary to keep kissing up to these big guys?  Prosper will soon too.

Pony up and pay for a service?  Did you carefully read my reposted message?  You might be able to compete for now by signing up for NSR, but the big boys are the ones who will develop the fastest and the most efficient APIs, which you and I have no access to or can't afford.  All they need to do is to beat NSR by 1 second or fraction of a second to soak up the best of loans, especially when they are allowed to take 50 or 75% of the loans.  If you are talking about frontrunning, big boys will always win.  Ask Goldman Sachs if you are not sure.
So what?  Speculation and what-ifs about the big boys is just more of what I don't understand.  And it's so common on this forum, I've been trying to figure out the source.  Still not certain of it.

At the end of the day, you can spend your time stressed, complaining, or worried about what-ifs and the like.  I'll just spend my time investing and practicing my clicking skills :)
Title: Re: Competing with institutional lenders for notes.
Post by: berniemadeoff on July 17, 2013, 07:50:54 AM
LC has more than enough institutional backing to survive going forward.  Is it necessary to keep kissing up to these big guys?  Prosper will soon too.

Pony up and pay for a service?  Did you carefully read my reposted message?  You might be able to compete for now by signing up for NSR, but the big boys are the ones who will develop the fastest and the most efficient APIs, which you and I have no access to or can't afford.  All they need to do is to beat NSR by 1 second or fraction of a second to soak up the best of loans, especially when they are allowed to take 50 or 75% of the loans.  If you are talking about frontrunning, big boys will always win.  Ask Goldman Sachs if you are not sure.
So what?  Speculation and what-ifs about the big boys is just more of what I don't understand.  And it's so common on this forum, I've been trying to figure out the source.  Still not certain of it.

At the end of the day, you can spend your time stressed, complaining, or worried about what-ifs and the like.  I'll just spend my time investing and practicing my clicking skills :)

At 24, you probably know more about investing, p2p lending, etc than 99.99% of the public, but some of us here have been investing and involved in the capital markets for almost as many years as you've been alive.  We have seen that good things have a tendency of becoming not good over time.  Call it arbitrage, whatever.  But I think there are some of us here that want to see p2p investing remain open to the little guy.  Once the hedge funds and institutions overrun this market, all of your clicking will be done.
Title: Re: Competing with institutional lenders for notes.
Post by: GS on July 17, 2013, 08:32:53 AM
There are a few ways discussed in the past to keep the "little guy" in the game.

One was already mentioned, and that would be limiting the investments in any loan to a small amount (like $100) for a set period after it's posted (like 4 hours).

One would be the opposite of the "Whole loan program", a "Fractional Loan program", where a percentage of the loans are set aside for small amounts (like $100) for the first 24 hours.  For example, a randomly selected 25% of loans are set for whole purchase only, 25% are set for fractional investing only, and the other 50% are a free for all for, for the first 24 hours.

Another would be set a hard cap on how much large investors can contribute to a loan.  I understand it's capped it 75% now, but a loan could still be grabbed in seconds by two large investors who both kick in 50%.  Perhaps, saying that 25% of the loan has to be funded with investments of $100 or less would work.

I'm sure there are other ideas.  The question is does LC care about retaining the small investor.  The bad part is, as pointed out before, there is not an easy way to get out of a LC IRA, it could take years to unwind while your payments sit idle.  I think LC owes a responsibility not to throw the small investors under the bus.

Title: Re: Competing with institutional lenders for notes.
Post by: TonySaunders on July 17, 2013, 01:22:09 PM
If you like the returns from selecting the "Cream of the crop", then pony up and pay for a service that lets you compete.

I would do that. But I'd be surprised if any automated service were even attempting to resolve this issue; I bet those services are intended for general automated investing, not competing for access during a 15 second window of opportunity.

I'm a software development engineer, so I think I could develop my own auto-investor that could do it, but I still have my fingers crossed that LC will implement some way to provide equitable access. That approach is just an arms race anyway, LC involvement is the only way to fix it. I can think of several strategies and I'm sure that the folks at LC are quite aware of them.

There's not enough for everyone to have everything they want, but there's no reason everyone can't have a fair share.
Title: Re: Competing with institutional lenders for notes.
Post by: TonySaunders on July 17, 2013, 01:24:01 PM
I literally took 10 seconds to select 4 notes at 10am this morning. I got 3 of them, I was pretty happy to get such good results this time.
Title: Re: Competing with institutional lenders for notes.
Post by: yojoakak on July 17, 2013, 01:58:16 PM
I literally took 10 seconds to select 4 notes at 10am this morning. I got 3 of them, I was pretty happy to get such good results this time.

So what you're saying is, the big investors are actually doing us a favor by leaving us with so few choices of which loans to invest in.

An interesting perspective!
Title: Re: Competing with institutional lenders for notes.
Post by: TonySaunders on July 17, 2013, 02:04:47 PM
I literally took 10 seconds to select 4 notes at 10am this morning. I got 3 of them, I was pretty happy to get such good results this time.

So what you're saying is, the big investors are actually doing us a favor by leaving us with so few choices of which loans to invest in.

An interesting perspective!

I can't quite tell if you are joking, or maybe I'm just dense and I don't get it. :)

Just to be clear, I was happy because I got most of the notes I wanted, instead of getting elbowed out entirely.

Tony
Title: Re: Competing with institutional lenders for notes.
Post by: LonghornSF on July 17, 2013, 02:05:22 PM
You guys need to think of it from LC's perspective. They don't care if the "little guy", aka individual investors, fund loans or institutions do it. All they want is for the loans to get funded. LC has absolute zero incentive to set aside loans for individual investors, or stretch out the funding process any longer than the market requires. If LC could get every loan funded instantly by institutions they would go that route. In fact, I wouldn't be surprised at all if the platform were closed to individuals in a few years given that individuals are probably a bigger hassle to deal with.
Title: Re: Competing with institutional lenders for notes.
Post by: TonySaunders on July 17, 2013, 02:08:44 PM
You guys need to think of it from LC's perspective. They don't care if the "little guy", aka individual investors, fund loans or institutions do it. All they want is for the loans to get funded. LC has absolute zero incentive to set aside loans for individual investors, or stretch out the funding process any longer than the market requires. If LC could get every loan funded instantly by institutions they would go that route. In fact, I wouldn't be surprised at all if the platform were closed to individuals in a few years given that individuals are probably a bigger hassle to deal with.

Institutional investors are competing with each other too. (It only takes two of them for it to be a problem) I'm sure they are also interested in more equitable access that doesn't depend on race conditions, and it's in LC's interest to keep as many of them happy as possible.
Title: Re: Competing with institutional lenders for notes.
Post by: yojoakak on July 17, 2013, 02:21:31 PM
I can't quite tell if you are joking...

Only half-joking.

The Tyranny of Choice
http://www.swarthmore.edu/SocSci/bschwar1/Sci.Amer.pdf
Title: Re: Competing with institutional lenders for notes.
Post by: GS on July 17, 2013, 03:03:47 PM
You guys need to think of it from LC's perspective. They don't care if the "little guy", aka individual investors, fund loans or institutions do it. All they want is for the loans to get funded. LC has absolute zero incentive to set aside loans for individual investors, or stretch out the funding process any longer than the market requires. If LC could get every loan funded instantly by institutions they would go that route. In fact, I wouldn't be surprised at all if the platform were closed to individuals in a few years given that individuals are probably a bigger hassle to deal with.

I disagree with some things you said.  First, LC is going through a lot of trouble to attract small investors, offering no-fee IRAs, and bonuses to people who invest as little as $2500.  Why do this, then not take some minimal action to ensure that those investors they are enticing are not shut out of all the decent loans.  There is room here for everyone to play.

Secondly, I don't think there is any advantage to LC, the barrowers, or the investors, if the loan is funded in seconds or over several days.  I'm not exactly sure how long the average time from posting to issuing is, but is probably a week or more.  And it's rare that I see a loan more than 2 days old on the platform.  As long the average time for funding is not greater than the average time for approval, I think funding time is a non-issue.

That said, I do agree that LC may not care about individual investors, or do not want to do anything that would be seen as an affront by the institutional investors.  It would be a good question to ask the LC execs., whether or not they have a plan to keep the small investors in the game.   
Title: Re: Competing with institutional lenders for notes.
Post by: Zach on July 17, 2013, 03:55:49 PM
You guys need to think of it from LC's perspective. They don't care if the "little guy", aka individual investors, fund loans or institutions do it. All they want is for the loans to get funded. LC has absolute zero incentive to set aside loans for individual investors, or stretch out the funding process any longer than the market requires. If LC could get every loan funded instantly by institutions they would go that route. In fact, I wouldn't be surprised at all if the platform were closed to individuals in a few years given that individuals are probably a bigger hassle to deal with.

+1 I can't even tell you how much I agree with this!

The only possible incentive is that us small investors could provide great PR/word-of-mouth marketing to the borrower side - and possibly the investor side. They will always have incentive to make their brand more well-known. This may be the sole reason they are keeping us around.
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 17, 2013, 03:58:21 PM
LC has more than enough institutional backing to survive going forward.  Is it necessary to keep kissing up to these big guys?  Prosper will soon too.

Pony up and pay for a service?  Did you carefully read my reposted message?  You might be able to compete for now by signing up for NSR, but the big boys are the ones who will develop the fastest and the most efficient APIs, which you and I have no access to or can't afford.  All they need to do is to beat NSR by 1 second or fraction of a second to soak up the best of loans, especially when they are allowed to take 50 or 75% of the loans.  If you are talking about frontrunning, big boys will always win.  Ask Goldman Sachs if you are not sure.
So what?  Speculation and what-ifs about the big boys is just more of what I don't understand.  And it's so common on this forum, I've been trying to figure out the source.  Still not certain of it.

At the end of the day, you can spend your time stressed, complaining, or worried about what-ifs and the like.  I'll just spend my time investing and practicing my clicking skills :)

At 24, you probably know more about investing, p2p lending, etc than 99.99% of the public, but some of us here have been investing and involved in the capital markets for almost as many years as you've been alive.  We have seen that good things have a tendency of becoming not good over time.  Call it arbitrage, whatever.  But I think there are some of us here that want to see p2p investing remain open to the little guy.  Once the hedge funds and institutions overrun this market, all of your clicking will be done.
And all the complaining in the world will do what to change the course?  I don't see any value add by any of this complaining and speculation, so I struggle to see why we as a community even bother.

I think everyone gets fixated on just one side of this equation.  Obviously currently investment exceeds demand.  There are plenty reasons to guess and speculate as to why this is occurring.  But demand is increasing and the possible market is quite large, while the attractiveness of other fixed income investments will likely improve in the short to medium term (unless something goes awry in the economy). 

In banking, there is a few reasons you get deposit relationships.  One of the main ones is they also bring loan relationships.  I'd be surprised if that isn't a fundamental part of LC's business model as well.
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 17, 2013, 06:50:00 PM
Hey guys! 

Since I've always have noticed groups will demonize the other side before actually talking to them, I emailed LC about the topic of this thread.  I told them we as a forum were worried about P2P become B2P (loved that, whoever came up with it). 

Well, I just got off from a phone call from LC today (called me the same day).  A gentleman named Eric wanted to talk and tell me why LC is not forsaking retail investors.  He started by noting I'd been investing since 2009 with LC, so he knew I've seen rapid changes.  These were the takeaways:

1) The average note takes 5 hours to fund. 

2) LC has tried to balance the amount of retail and institutional money.  LC is actually designing a few products that are coming out in a the next few months geared to helping retail investors out.  I didn't ask specifics about this.

3) In the past month or two, both retail demand and institutional demand has increased dramatically and they haven't gotten enough increase in borrowers yet.

4) The problem with the high yielding notes disappearing quickly is known by LC.  The problem is that the high grade notes represent a small amount of the total notes offered, but it represents a large amount of the type of notes investors want.  Roughly 40% of notes are A and B and roughly 70% are ABC.

5) LC is very concerned about retail investors and view them as the source of long term success for both loans and investors.   They want to be very proactive in making sure they aren't edged out.

He said that if I was concerned about the platform edging out retail investors, feel free to email or call him with additional observations.  He thanked me for bringing this to his attention.
Title: Re: Competing with institutional lenders for notes.
Post by: Peter on July 17, 2013, 07:03:13 PM
Thanks Rawraw, I have heard similar sentiment when I talk with LC management. What no one has mentioned here is the importance of retail investors for marketing. With an IPO coming up perception is going to be important. If LC turns into a place only for the Hedge Funds and Insurance companies to play that is not a very interesting story.

I believe LC really wants to keep retail investors around not because they like us, but because they need us. Lending Club does not mention peer to peer any more and haven't for several years now, but they don't want to be perceived as just a playground for the super-rich. For true disintermediation to occur they must be inclusive of all investors and this is the story they want to tell the world.
Title: Re: Competing with institutional lenders for notes.
Post by: Lovinglifestyle on July 17, 2013, 07:18:23 PM
I can't quite tell if you are joking...

Only half-joking.

The Tyranny of Choice
http://www.swarthmore.edu/SocSci/bschwar1/Sci.Amer.pdf

I wasn't able to access more than the first two paragraphs of this article, but it sounded interesting so I went to check a book I have and enjoyed tremendously about choices.  Didn't realize it is by the same author! (The Paradox of Choice)
Title: Re: Competing with institutional lenders for notes.
Post by: GS on July 17, 2013, 07:24:02 PM
Thanks RawRaw and Peter,

I'm glad to see that LC plans to find ways to keep smaller investors in the market.  Good news.
Title: Re: Competing with institutional lenders for notes.
Post by: Rob L on July 17, 2013, 09:02:12 PM
Maybe the question to ask LC goes something like "We individual / retail investors are feeling a bit paranoid about our long term relevance to LC when we see you have attracted substantial and growing institutional interest. Can you explain why LC feels we are an important part of its future and alleviate our concerns? Where do we fit in long term?"
Title: Re: Competing with institutional lenders for notes.
Post by: berniemadeoff on July 18, 2013, 12:21:30 AM
LC will care as long as it's part of their IPO pitchbook and investor backlash would hurt the offering price.  We need to make the most noise now while we have some leverage.
Title: Re: Competing with institutional lenders for notes.
Post by: flyp52 on July 18, 2013, 12:45:20 AM
Today at the 2:00pm feeding frenzy I got shut out of every loan I tried to get into, including a $24K loan!  I'd like to see a rule something like not allowing an investor to take more than 30% of the remaining loan amount during the first say 10 minutes a loan is listed.  That would at least give more investors, investing at a range of investment levels, a shot at the popular loans.
Title: Re: Competing with institutional lenders for notes.
Post by: LonghornSF on July 18, 2013, 01:09:46 AM
Hey guys! 

Since I've always have noticed groups will demonize the other side before actually talking to them, I emailed LC about the topic of this thread.  I told them we as a forum were worried about P2P become B2P (loved that, whoever came up with it). 

Well, I just got off from a phone call from LC today (called me the same day).  A gentleman named Eric wanted to talk and tell me why LC is not forsaking retail investors.  He started by noting I'd been investing since 2009 with LC, so he knew I've seen rapid changes.  These were the takeaways:

1) The average note takes 5 hours to fund. 

2) LC has tried to balance the amount of retail and institutional money.  LC is actually designing a few products that are coming out in a the next few months geared to helping retail investors out.  I didn't ask specifics about this.

3) In the past month or two, both retail demand and institutional demand has increased dramatically and they haven't gotten enough increase in borrowers yet.

4) The problem with the high yielding notes disappearing quickly is known by LC.  The problem is that the high grade notes represent a small amount of the total notes offered, but it represents a large amount of the type of notes investors want.  Roughly 40% of notes are A and B and roughly 70% are ABC.

5) LC is very concerned about retail investors and view them as the source of long term success for both loans and investors.   They want to be very proactive in making sure they aren't edged out.

He said that if I was concerned about the platform edging out retail investors, feel free to email or call him with additional observations.  He thanked me for bringing this to his attention.

Respectfully, I think you are being very naive. Let's sort through a few of his answers:

1) The average note takes 5 hours to fund.

Ok, how quickly do the best notes fund (answer: within minutes or less)? Sure, after institutions and sophisticated individuals pick off the best loans, there are some left. You can bet that the remaining loans have a much lower return on a risk-adjusted basis.

2) LC has tried to balance the amount of retail and institutional money.  LC is actually designing a few products that are coming out in a the next few months geared to helping retail investors out.  I didn't ask specifics about this.

My guess is it is similar to their auto invest product where they blindly invest across loans for you. I suspect that such a solution would have a negative selection bias.

3) In the past month or two, both retail demand and institutional demand has increased dramatically and they haven't gotten enough increase in borrowers yet.

Hence the reason LC decreased interest rates across the board for loans. Don't count on this supply-demand imbalance correcting itself until rates go much lower.

4) - no disagreement here

5) LC is very concerned about retail investors and view them as the source of long term success for both loans and investors.   They want to be very proactive in making sure they aren't edged out.

 ::) I do believe they are concerned about getting more individuals in as borrowers.


I'm shaking my head at some of these posts on here. "Us individuals deserve more time", "LC needs to protect individuals", "They owe us", etc. Fellow individual investors, understand this: LC does NOT care who funds a loan. If anything, they prefer institutions. They would rather deal with 100 institutions that invest $100 million each than 1 million individuals that put in $10k each. Institutions are easier to deal with, have lower return expectations, and carry far more weight. Even one modest-sized institutional investor would invest more than everyone on this board combined. We have no bargaining power in this situation.

Rant over, hope I dispelled some myths.  I do believe that good returns will continue to exist on LC, at least for awhile :)
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 18, 2013, 06:49:55 AM
Didn't say I agreed/disagreed, just relaying the message :)

1) The average note takes 5 hours to fund.

Ok, how quickly do the best notes fund (answer: within minutes or less)? Sure, after institutions and sophisticated individuals pick off the best loans, there are some left. You can bet that the remaining loans have a much lower return on a risk-adjusted basis.


You conveniently ignored the explanation LC gave about this.  Was there a reason for that?

Quote
I'm shaking my head at some of these posts on here. "Us individuals deserve more time", "LC needs to protect individuals", "They owe us", etc. Fellow individual investors, understand this: LC does NOT care who funds a loan. If anything, they prefer institutions. They would rather deal with 100 institutions that invest $100 million each than 1 million individuals that put in $10k each. Institutions are easier to deal with, have lower return expectations, and carry far more weight. Even one modest-sized institutional investor would invest more than everyone on this board combined. We have no bargaining power in this situation.
And how do you know this?  We can all make up any good sounding rationals, doesn't make them true.
Title: Re: Competing with institutional lenders for notes.
Post by: GS on July 18, 2013, 09:58:59 AM
I would think that LC would be better served in the long run by maintaining a large diverse group of a happy investors.  In my opinion, it would be incredibly stupid for LC to become completely reliant on hedge fund money, because while market conditions or the novelty of LC may make it the hot investment this year, who is to say what next year holds?  Safer bonds may offer better returns ... Or a new lending platform may gain share ... Who knows. 

It's not like LC has not taken action in the past to cater to both groups, and no one is asking for anything radical that will hurt the other side.  If LC says they have plans to address the problem, then I believe them.
Title: Re: Competing with institutional lenders for notes.
Post by: LonghornSF on July 18, 2013, 11:25:00 AM
Quote
You conveniently ignored the explanation LC gave about this.  Was there a reason for that?

What explanation did they provide? Maybe I missed it.
Title: Re: Competing with institutional lenders for notes.
Post by: LonghornSF on July 18, 2013, 11:28:36 AM
Quote
I would think that LC would be better served in the long run by maintaining a large diverse group of a happy investors.

Yes, they will maintain a large, diverse group of institutional investors.  ;D

On one other note, I see a lot of people assuming that institutional means "hedge fund." While there is certainly some hedge fund money at play here, I am confident that LC will mostly appeal to investors that have lower return expectations such as pension funds and endowments. These investors generally take a longer term view and wouldn't pull their money out of LC on a whim. As LC returns continue to decline, hedge funds will become a smaller part of the LC origination scene because they (by and large) have double digit annual return expectations. I expect HFs to become much bigger players on the note trading side though.
Title: Re: Competing with institutional lenders for notes.
Post by: thezfunk on July 18, 2013, 12:19:49 PM
I thought I would chime in with my personal experience.  I have been using Bryce M.'s service in open beta to grab notes and I have calender events setup to remind me when to log in.  I am there four times a day literally spam clicking the refresh button to see the new selections.  The very moment they show up I select and click which takes me to the Lending Club page.  I have already logged into Lending Club a head of time so I don't have to go through the log in screen again.  In the time it takes me to refresh a page and make two clicks the notes are gone.  I was only missing a handful periodically up until about a week ago.  In the past week almost everyone I select is gone by the time I try and confirm it.  I don't look at the notes.  I don't read their title.  I select and try and order.  Gone.  That fast.  The frustration is building. 

I am also an investor on Prosper.  I have filters setup to auto invest with their tool.  So far, my earnings get deployed fairly quickly.  With Lending Club, I can't get my initial investment fully deployed.
Title: Re: Competing with institutional lenders for notes.
Post by: SeattleSun on July 18, 2013, 01:50:32 PM
I thought I would chime in with my personal experience.  I have been using Bryce M.'s service in open beta to grab notes and I have calender events setup to remind me when to log in.  I am there four times a day literally spam clicking the refresh button to see the new selections.  The very moment they show up I select and click which takes me to the Lending Club page.  I have already logged into Lending Club a head of time so I don't have to go through the log in screen again.  In the time it takes me to refresh a page and make two clicks the notes are gone.  I was only missing a handful periodically up until about a week ago.  In the past week almost everyone I select is gone by the time I try and confirm it.  I don't look at the notes.  I don't read their title.  I select and try and order.  Gone.  That fast.  The frustration is building. 


I read conflicting posts on this subject.  For instance Rob L. reported on another thread that his 6am today's experience using P2P Picks was "normal".  So is there a level of experience/compentency involved here or ?????

If thezfunk's posts is accurate (I hope it's not) then I might conclude that P2P Picks without an "auto invest" feature is useless?   

Confused in Seattle!
Title: Re: Competing with institutional lenders for notes.
Post by: thezfunk on July 18, 2013, 02:22:41 PM
I thought I would chime in with my personal experience.  I have been using Bryce M.'s service in open beta to grab notes and I have calender events setup to remind me when to log in.  I am there four times a day literally spam clicking the refresh button to see the new selections.  The very moment they show up I select and click which takes me to the Lending Club page.  I have already logged into Lending Club a head of time so I don't have to go through the log in screen again.  In the time it takes me to refresh a page and make two clicks the notes are gone.  I was only missing a handful periodically up until about a week ago.  In the past week almost everyone I select is gone by the time I try and confirm it.  I don't look at the notes.  I don't read their title.  I select and try and order.  Gone.  That fast.  The frustration is building. 


I read conflicting posts on this subject.  For instance Rob L. reported on another thread that his 6am today's experience using P2P Picks was "normal".  So is there a level of experience/compentency involved here or ?????

If thezfunk's posts is accurate (I hope it's not) then I might conclude that P2P Picks without an "auto invest" feature is useless?   

Confused in Seattle!

I do not know which tier notes Rob L. is selecting but I am only trying to grab the top '1%' notes.  P2P Picks lays them out in tiers.  I am not sure what I am allowed to say but lets just say that I am grabbing what P2P Picks is selecting as the 'best' notes.  I am sure if P2P Picks is selecting them as the best then there are other algorithms that are as well.
Title: Re: Competing with institutional lenders for notes.
Post by: TonySaunders on July 18, 2013, 02:39:14 PM
I do not know which tier notes Rob L. is selecting but I am only trying to grab the top '1%' notes.  P2P Picks lays them out in tiers.  I am not sure what I am allowed to say but lets just say that I am grabbing what P2P Picks is selecting as the 'best' notes.  I am sure if P2P Picks is selecting them as the best then there are other algorithms that are as well.

I doubt P2P Picks even hits the 30 second window it needs to in order to observe these notes. And they are certainly gone by the time you get to it. It's not a problem of optimizing which loans to invest in, it's a problem of doing it before they are gone.

I'm not exaggerating, you have 30 seconds, no more, often less. Third party services have the same problem. I'm skeptical that even an automated service that targets this issue would be effective.
Title: Re: Competing with institutional lenders for notes.
Post by: berniemadeoff on July 18, 2013, 03:10:16 PM
Lets hope the fast institutional investors are using models that only select the worst loans, leaving us with the best in the bunch!
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 18, 2013, 03:19:21 PM
Quote
You conveniently ignored the explanation LC gave about this.  Was there a reason for that?

What explanation did they provide? Maybe I missed it.
It was the #4 takeaway.  That a lot of the ideal loans people want are a very small part of the platform and until they can grow this or the demand changes, the loans will continue to get funded quickly.  He stated that LC is centered around prime people, so of course you have more ABC's than the DEF's.

For example, in P2P picks the LM notes hang around a while.  But it is the desirable low grade ones in PM that go quickly -- and it's just because the platform isn't necessarily geared to getting a ton of those type of borrowers.

My rate for my LM portoflio is 11%.
My rate for the PM portfolio is 17%.

In Bryce's backtests, if I remember correctly, they both have similar ROIs.

Title: Re: Competing with institutional lenders for notes.
Post by: thezinfan on July 18, 2013, 03:30:28 PM
Rawraw, could you clarify what you mean by "rate"  in the folio sentence?

"My rate for my LM portoflio is 11%."

is rate = return, or percentage of loans you are able to invest in via P2Ppicks.
Title: Re: Competing with institutional lenders for notes.
Post by: thezfunk on July 18, 2013, 04:22:53 PM
Quote
You conveniently ignored the explanation LC gave about this.  Was there a reason for that?

What explanation did they provide? Maybe I missed it.
It was the #4 takeaway.  That a lot of the ideal loans people want are a very small part of the platform and until they can grow this or the demand changes, the loans will continue to get funded quickly.  He stated that LC is centered around prime people, so of course you have more ABC's than the DEF's.

For example, in P2P picks the LM notes hang around a while.  But it is the desirable low grade ones in PM that go quickly -- and it's just because the platform isn't necessarily geared to getting a ton of those type of borrowers.

My rate for my LM portoflio is 11%.
My rate for the PM portfolio is 17%.

In Bryce's backtests, if I remember correctly, they both have similar ROIs.

Are you keeping track of which or how many you are grabbing in PM with portfolios or something on Lending Club?
Title: Re: Competing with institutional lenders for notes.
Post by: LonghornSF on July 18, 2013, 06:03:08 PM
Quote
It was the #4 takeaway.  That a lot of the ideal loans people want are a very small part of the platform and until they can grow this or the demand changes, the loans will continue to get funded quickly.  He stated that LC is centered around prime people, so of course you have more ABC's than the DEF's.

That's fair. What I'm trying to point out is that not that long ago the "ideal" high rate loans used to stick around on the platform for awhile. Now, they are funded within minutes or often <30 seconds. There's nothing wrong with by the way!

Quote
For example, in P2P picks the LM notes hang around a while.  But it is the desirable low grade ones in PM that go quickly -- and it's just because the platform isn't necessarily geared to getting a ton of those type of borrowers.

My rate for my LM portoflio is 11%.
My rate for the PM portfolio is 17%.


Maybe I'm being daft but what is LM and PM? I don't use P2P picks.
Title: Re: Competing with institutional lenders for notes.
Post by: Rob L on July 18, 2013, 06:24:21 PM
This seems as good a place to post this as anywhere. I sometimes log into LC a few minutes before each of the 4 upload times. Then I go to browsenotes, filter for 36 month loans, C,D,E and F grades and see how many are there before upload time. After the new loans arrive I take a look again and get a feel for how many were added. FWIW, before the upload today at 2pm PDT there were precisely zero of these before new loans were added. This is a first for me. It may have happened before (probably did), but I haven't seen it. Good, bad or indifferent these all get funded PDQ.
Title: Re: Competing with institutional lenders for notes.
Post by: SeattleSun on July 18, 2013, 06:54:30 PM
THE NEW NORMAL?

Rob,

I interputed your post early today saying things were "normal" to mean they were the same as you posted on July 1st, see below.

You could use P2P Picks in a manual mode and do OK.


Q.  How much action did you lay in that 30 day period.  I would estimate over $100,000?


.......................      The Old Normal      ............................

Bob L posted this on July 1st

"Today I finished purchasing notes totaling 100% of my initial LC funding exclusively using P2P-Picks.

Since approx. 1 June 2013 LC has posted about 16,349 new notes and I bought 1,672; remarkably close to 10%.

As you know P2P-Picks has two models; Loss Minimizer (LMIN) and Profit Maximizer (PMAX). I bought 796 LMIN notes and 860 PMAX notes. I know the totals don't exactly match because I bought a few others on a whim, and sold some duplicates on Foliofn. Dollar allocation is 55% PMAX and 45% LMIN (which I think is a conservative mix).

PMAX grades notes as Top 1%, 5% and 10%. LMIN grades notes as top 5%, top 10% and top 25%. I initially started funding all notes the same $ amount and saw my portfolio was quickly being dominated by 25% LMIN's. The next evolution in my strategy was to eliminate all the 25% LMIN's completely and that balanced out my purchases for a while. Then I got the bright? idea that I should invest more per note in the PMAX 1% than 5% and more in the PMAX 5% than 10%, so I did. Same for the 5% LMIN's and 10% LMIN's. As I said I had long before stopped investing in any 25% LMIN's. I would love to hear Bryce's commentary on this $ allocation of investable funds. My guess is that I overdid it on the 1%'ers and possibly would have been better off with the same $ allocation to 1% and 5% and maybe a bit less for 10% PMAX. Perhaps the same allocation for 5% and 10% LMIN's would have been better. Time will tell.

Now let me speak to auto-invest, or lack there of with P2P-Max. It's basic human nature to think that the smart money is grabbing all the "best" loans before I get my shot at them, and I'm getting the leftovers. If there's anyone out there (other than LC itself) who has better data than I on this matter over the past month I would be surprised. For all the discussions of  the dominance of high speed autobots, most of the time they never show up. Don't ask me why. Down to the details LC almost always releases new notes between 2 and 3 minutes after each of the 4 magic hours during the day. Often a bit earlier than 2 minutes after the hour and almost never post 3 minutes after. P2p-Picks is extremely punctual posting its recommendations; 4 minutes past the magic hour (I give it an extra second to 4:01). Refresh your screen at 4:01 after and the recommended picks will be there. PMAX is all that matters and you should already be on that page. The LMIN recommendations will be there for a relatively long time and you can check them after you've done your PMAX purchases. You will have previously opened your LC account in a separate tab at the top of the hour, long before the "buying frenzy", so you don't have to spend the time to log in while trying to buy notes. Click on the P2P-Picks dollar allocations for each recommended note, then start at the top and hit go. Wait for that loan's go button to disappear. Continue to hit go till you've hit the last one. Each Go will popup an new LC note added page (if the loan's already been fully funded you'll get a zero notes added. On the popup of the last go hit continue, then hit view notes and finally buy. You do not have time to be more choosy here. Once you get the hang of it the whole process takes less than two minutes, then switch to LMIN picks and repeat for another couple of minutes. For LMIN you will have the time to look at each note's interest rate rather than immediately clicking buy, and have the opportunity to discard the low ones if you want. If you miss one of the 4 magic times a day don't worry, I'll quote another poster who said "notes are like Doritos; they'll make more". At least for now, if you follow the follow the above you will not be substantially disadvantaged by autobots. Maybe I was lucky, but this took about 20 minutes of my days over the past month and I was able to organize my schedule to accommodate it. For other's I'm sure this sounds a bit crazy. Given the choice between having autoinvesting available to me or P2P-picks selections available I went with P2p-picks. Just a personal choice. If I were to add additional funds in the near term I would still be relatively unconcerned about the competition from autobuying, but it could turn on a dime and make things much more difficult.

For now without auto invest who ever's the quickest gets first shot at the top 1%'ers. With auto invest it be may more problematic, but only for allocation by P2P-Picks to P2P Picks customers, not LC. P2P Picks are by no means LC's top 1% (if LC has a top 1%).


Title: Re: Competing with institutional lenders for notes.
Post by: Rob L on July 18, 2013, 07:22:12 PM
Read my post earlier this afternoon in the P2P-Picks section. Yes, apparently things have changed over the past week. I said in the post you quoted that "maybe I was lucky". I said in the post earlier this afternoon that I think I was.
Title: Re: Competing with institutional lenders for notes.
Post by: SeattleSun on July 19, 2013, 12:06:19 AM

Although it would be hard to prove cause and effect IMO the "sea change" in the last 18 days was caused by the "Lend It Conference" in New York City. 

We need a "Borrow It" Conference in order to bring things back into balance again.  LOL

Maybe we can have the "Borrow It Conference" in Detroit?
Title: Re: Competing with institutional lenders for notes.
Post by: SarahV on July 19, 2013, 12:54:57 AM
We need a "Borrow It" Conference in order to bring things back into balance again.  LOL

Great idea. I think I could put together a very respectable presentation teaching people the value of borrowing money at interest rates over 20%! Especially people with high credit ratings. I will explain how in the world of socially responsible P2P borrowing, people with high income have a DUTY to take out loans at high interest rates - they are the ones who can best afford it, after all!
Title: Re: Competing with institutional lenders for notes.
Post by: mukoh on July 19, 2013, 01:09:25 AM
We need a "Borrow It" Conference in order to bring things back into balance again.  LOL

Great idea. I think I could put together a very respectable presentation teaching people the value of borrowing money at interest rates over 20%! Especially people with high credit ratings. I will explain how in the world of socially responsible P2P borrowing, people with high income have a DUTY to take out loans at high interest rates - they are the ones who can best afford it, after all!

You mean kind of like the president does? Socially responsible to pay more into the system? :)
Title: Re: Competing with institutional lenders for notes.
Post by: Fred on July 19, 2013, 01:10:19 AM
Great idea. I think I could put together a very respectable presentation teaching people the value of borrowing money at interest rates over 20%!

To pay off credit cards charging 25%.
Title: Re: Competing with institutional lenders for notes.
Post by: thezfunk on July 19, 2013, 10:01:15 AM

Although it would be hard to prove cause and effect IMO the "sea change" in the last 18 days was caused by the "Lend It Conference" in New York City. 

We need a "Borrow It" Conference in order to bring things back into balance again.  LOL

Maybe we can have the "Borrow It Conference" in Detroit?

HA!  I was actually thinking the exact same thing.

You know, I guess it is some sort of 'validation' that the big boys have jumped in with us but now that we can all feel good about our decision to invest our hard earned money into P2P they can stay the hell out! 

I have heard this type of story over and over again.  Somewhere someone or a small group figure out how to do well for themselves.  Next thing you know the cat is out of the bag and you get edged by the big money and you can't compete.  It's almost like you have to pick yourself up, dust yourself off, pick up your marbles (or what's left of them) and go find somewhere else to play.  When you do, it's only a matter of time before the big money bullies find out about it and show up to elbow you out of the way again.

Don't get me wrong, I think everyone can play together in this sandbox.  It will be up to Lending Club, Prosper and whoever else gets involved to keep it fair. *Gasp* maybe some rules to even the playing field...oh even...the horror...no, I can't say it...*whispers* self imposed regulations of some kind *shivers*.
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 19, 2013, 04:34:40 PM
Rawraw, could you clarify what you mean by "rate"  in the folio sentence?

"My rate for my LM portoflio is 11%."

is rate = return, or percentage of loans you are able to invest in via P2Ppicks.
Rate as weighted average interest rate.  Just showing the relative difference in PM and LM notes -- and subtly hinting at potential LM returns aren't too shabby, either.

LM = Loss Minimizer in P2P = Lowest Expected Rate of Default
PM = Profit Maximizer = Highest Expected ROI

Title: Re: Competing with institutional lenders for notes.
Post by: neals384 on July 20, 2013, 12:01:18 AM
I would think that LC would be better served in the long run by maintaining a large diverse group of a happy investors.  In my opinion, it would be incredibly stupid for LC to become completely reliant on hedge fund money, because while market conditions or the novelty of LC may make it the hot investment this year, who is to say what next year holds?  Safer bonds may offer better returns ... Or a new lending platform may gain share ... Who knows. 

It's not like LC has not taken action in the past to cater to both groups, and no one is asking for anything radical that will hurt the other side.  If LC says they have plans to address the problem, then I believe them.

+1.

Just look what happened to Prosper last fall when the institutionals stopped investing.  Darn near brought the company down. 

Any company that has only a handful of large customers will eventually discover that the customer can squeeze the profit right out of their pocket.  In LC's case, institutionals may well ask for reduced fees, say 3/4% instead of 1%.  Who knows, maybe they get that already.
Title: Re: Competing with institutional lenders for notes.
Post by: rawraw on July 20, 2013, 07:35:02 AM
The institutions do get lower fees and this is disclosed in the Prospectus -- it's what you'd expect when dealing with large volume clients.  This is why I dislike speculation, such as the prior "LC prefers one million dollar account than 10 accounts representing a million!" They never mentioned the fact LC makes less money on that one million dollar account. 
Title: Re: Competing with institutional lenders for notes.
Post by: Fred on July 20, 2013, 11:52:05 AM
I have heard this type of story over and over again.  Somewhere someone or a small group figure out how to do well for themselves.  Next thing you know the cat is out of the bag and you get edged by the big money and you can't compete.  It's almost like you have to pick yourself up, dust yourself off, pick up your marbles (or what's left of them) and go find somewhere else to play.  When you do, it's only a matter of time before the big money bullies find out about it and show up to elbow you out of the way again.

Maybe I am old enough to have accepted this -- as a fact of life.  IMO, this is a part of evolutionary process, which is still going on.
Title: Re: Competing with institutional lenders for notes.
Post by: yojoakak on July 20, 2013, 11:56:06 AM
The institutions do get lower fees and this is disclosed in the Prospectus -- it's what you'd expect when dealing with large volume clients.  This is why I dislike speculation, such as the prior "LC prefers one million dollar account than 10 accounts representing a million!" They never mentioned the fact LC makes less money on that one million dollar account.

LendingClub makes most of it's money off of ORIGINANTION fees... i.e. the Borrower borrows $10,000 or $30,000 or whatever and immediately pays 5% of that to LendingClub (A or B loans might pay less) .

A discount on the 1% SERVICE fee every month is small potatoes -- or are you saying Large Investors are getting a kickback on that Origination Fee?

https://www.lendingclub.com/public/rates-and-fees.action
http://www.lendingclub.com/kb/index.php?View=entry&EntryID=103
Title: Re: Competing with institutional lenders for notes.
Post by: Randawl on July 20, 2013, 12:23:51 PM
Certain institutional investors are insured against losses, all but guaranteeing that they will be profitable:



From the 10-K:

Contingencies

Credit Support Agreement

During the nine months ended December 31, 2012, the Company entered into a Credit Support Agreement with a Certificate investor. The Credit Support Agreement requires the Company to pledge and restrict cash in support of its contingent obligation to reimburse the investor for credit losses on Member Loans underlying the investor’s Certificate, that are in excess of a specified, aggregate loss threshold. The Company is contingently obligated to pledge cash, not to exceed $3.0 million, to support this contingent obligation and which number is premised upon investor volume. As of December 31, 2012, approximately $2.3 million was pledged and restricted to support this contingent obligation.

As of December 31, 2012, the credit losses pertaining to the investor’s Certificate have not exceeded the specified threshold, nor are future credit losses expected to exceed the specified threshold, and thus no expense or liability has been recorded. The Company currently does not anticipate recording losses resulting from its contingent obligation under this Credit Support Agreement. If losses related to the Credit Support Agreement are later determined to be likely to occur and are estimable, results of operations could be affected in the period in which such losses are recorded.


http://www.lendacademy.com/forum/index.php?topic=944.msg5686#msg5686
Title: Re: Competing with institutional lenders for notes.
Post by: mo on July 20, 2013, 02:50:56 PM
It's unlikely that is something that large investors will get going forward.  That was probably just an enticement given to the first few that agreed to invest in LC loans prior it it becoming 'main stream'.